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OUR defends cut

Published:Thursday | January 15, 2015 | 12:00 AM

Regulator says new tariff in line with JPS's licences

Arthur Hall, Senior News Editor

Surprised by some of the criticisms it has faced since its determination of the tariff increase requested by the Jamaica Public Service Company (JPS), the Office of Utilities Regulation (OUR) has moved to clear the air, while defending its ruling.

"We think some very unfortunate statements have been made by people whom we would expect a little bit more from," Albert Gordon, director general of the OUR, told The Gleaner yesterday.

"What we have done is given the JPS a tariff which is in strict accordance with its licences, which is the instrument we are obligated to use. Where we have some discretion, we have taken steps to assist the company in the areas where we think some assistance is necessary for it to improve its efficiency and viability and in the long term, reduce the cost of electricity to consumers," added Gordon.

PSOJ Criticism

He was responding to criticisms from the Private Sector Organisation of Jamaica (PSOJ) and others, who have charged that the OUR's decision to reduce the targeted rate of return to the JPS, in its determination issued on January 7, may harm the power sector.

According to Gordon, the tariff awarded to the JPS is based on the price cap and the revenue requirements of the company.

Gordon noted that the OUR has provided the JPS with a US$28-million windfall for this year which has not been highlighted by the critics.

Of that amount, US$13 million is for the Efficiency Improve-ment Fund, which was introduced in 2009 to help the company deal with its losses, and US$15 million to convert the JPS plant in Bogue, St James, to gas.

"We have assisted them in reducing the overall fuel cost by providing a fund to assist in the conversion of the plant in Bogue, in which both consumers and the JPS can benefit because of the significant savings that will flow from that," argued Gordon as he sought to justify the funding which the company will collect from its customers.

"... We don't want them to have to go out there and source financing because this project is a low hanging fruit.

"It's been there for the better part of a decade, and when fuel prices were higher

the expected payback was about two months, because you are spending some US$15 million and you are getting back US$70 million over two months. With oil prices now significantly reduced, the estimate is about US$30 million in savings, so you are still getting a six-month payback."

Sticking To Agreements

Gordon also scoffed at the PSOJ's claim that the OUR's determination, "is likely to send the wrong signals as it relates to Jamaica's commitment to fair play in its dealings with foreign investors and its ability to provide a consistent and predictable legal and regulatory environment for their operations".

"What investors look for is transparency and predictability, consistency in what you are doing. If you are an investor and you have signed an agreement saying this is how my rate will be set and the regulator sticks to the agreement, then you have some comfort.

"Several persons have been saying that we should forget those constraints and use more discretion and give the JPS more money on some basis that is not defined. But once you start doing that, then the investors can say 'just as how you throw away the book and give me more, you can throw away the book and give me less as well. I would rather you play by the rules'," added Gordon.